Avondale Exhibitions Limited v Arthur J Gallagher Insurance Brokers Limited [2018] EWHC 1311 (QB): The Extent Of A Broker's Duty To Advise An Insured About Disclosure Of Material Facts

Avondale Exhibitions v Arthur J Gallagher concerned a claim by a company against its insurance broker arising from an insurer's decision to decline cover.

In giving judgment for the defendant insurance broker, HHJ Keyser Q.C. (i) endorsed the statements of David Steel J in Jones v Environcom Limited [2010] EWHC 759 (Comm) and Flaux Jin Synergy Health (UK) Limited v CGU Insurance Plc [2010] EWHC 2583 (Comm) as to the scope of an insurance broker's duties, and (ii) held that the lack of expert evidence significantly limited, albeit did not altogether exclude, the possibility of a finding that the insurance broker had acted in breach of its duty to exercise reasonable skill and care.

Clare Dixon of 4 New Square, instructed by Simmons & Simmons, successfully represented Arthur J Gallagher Insurance Brokers Limited. The decision is considered by Katie Powell of 4 New Square.

THE BACKGROUND FACTS

The claimant company ("Avondale") was run and owned by Mr Watkins and his wife. The defendant insurance broker (referred to in the judgment by its previous name, "Giles") had arranged a policy of Commercial Combined insurance for Avondale since 2007 and for the years 2010/2011, 2011/12 and 2012/13 with QBE Insurance ("QBE").

On 26 August 2012, there was a fire at Avondale's business premises, causing serious damage to the premises and destroying trading stock. Avondale made a claim under the Commercial Combined policy for the year 2012/13. Following investigations, QBE declined cover and avoided the policies for 2010/2011, 2011/12 and 2012/13 on the grounds that Avondale had failed to disclose two criminal convictions of Mr Watkins. It was common ground between the parties that QBE was entitled to decline cover and avoid the policies on this basis.

Avondale advanced two cases against Giles:

Avondale's primary case was that it had informed Giles of the convictions and that Giles was in breach of its duty of care in failing to pass on the information to QBE. Giles disputed that it had been told of the convictions. However, Giles accepted that, if it had been, it would have been a breach of duty on its part to fail to pass on this information to QBE. Avondale's secondary case was that, regardless of whether or not it did inform Giles of the convictions, Giles was in breach of its duty of care in failing to take proper steps to bring to its attention the importance of making the necessary disclosure and to elicit the relevant information. In response, Giles...